Mutual of Omaha will continue to issue long-term care (LTC) insurance, remaining hopeful about the future of the industry, even as others leave the market.
Adam Walling, director of producer performance at Mutual of Omaha, committed to LTC insurance in a recent memo to agents, brokers, and distribution partners.
“We believe that LTCI provides value through product profitability and company diversification. The product aligns with our mission to help our customers protect what they care about and achieve their financial goals,” the memo said.
There are a few reasons behind the rising cost of LTC insurance. First and foremost, lower than normal interest rates have prevented profit gain on invested premium dollars. Treasury bond interest rates are about 43% lower today than they were 10 years ago, before the housing bubble burst. Also, most companies initially underpriced their products, believing that a substantial number of enrollees would drop their coverage before using their policies. And finally, more seniors are cashing in on their plans than originally expected.
While LTC insurance premiums are set to increase for other carriers in 2017, Mutual of Omaha has not requested a rate increase. To help offset the rise in premium cost, most states (all but nine) have adopted rate stability regulations. Walling believes that the market for LTC insurance will grow as the American population continues to age.
Mutual of Omaha’s reassurance came after several leading companies announced their plans to exit the LTC insurance market. To date, 90 percent of LTC insurers have stopped selling new coverage but will continue to provide service and pay claims on in force policies. That number includes John Hancock Financial and LifeSecure Insurance Company.